Which federal tax deductions have been suspended by tax reform?

In December 2017, Congress passed the largest tax reform bill in over 30 years. Included in the bill was the suspension (repeal) of several federal deductions for tax years 2018 – 2025, which we've summarized below.

Keep in mind: While some states are following the IRS's lead by suspending the same deductions, other states have decided to keep certain tax breaks mentioned below. When you go through your state return, we'll make sure to include any tax deductions that are still valid in your state.

An exemption is a specific amount you get to deduct for each taxpayer and dependent on your return.

In tax year 2017, the exemption was $4,050 per taxpayer or dependent, subject to a phase-out at higher income levels. The 2018 exemption was set to increase to $4,150 before it was suspended (repealed) through tax year 2025 by tax reform legislation.

For many families, the higher standard deduction coupled with the increased Child Tax Credit and the new $500 Credit for Other Dependents (aka "Family Tax Credit") is expected to offset the lost exemptions. However, this may not be true for everybody, especially families with older dependents.

This hypothetical example compares the associated tax savings for a married couple taking the standard deduction with an AGI of $50,000 and 2 child dependents under 17:

2018

2018 (repealed)

2017

Standard deduction: $24,000 x 12% = $2,880

Exemptions: $0

Child Tax Credit ($2000 per child): $4,000

Tax savings: $6,880*

Standard deduction: $13,000 x 15% = $1,950

Exemptions: ($4,150 x 4) x 15% = $2,490

Child Tax Credit ($1000 per child) = $2,000

Tax savings: $6,440*

Standard deduction: $12,700 x 15% = $1,905

Exemptions: ($4,050 x 4) x 15% = $2,430

Child Tax Credit ($1000 per child) = $2,000

Tax savings: $6,335*

Same situation, except this time both dependents are 17 or older:

2018

2018 (repealed)

2017

Standard deduction: $24,000 x 12% = $2,880

Exemptions: $0

Family Tax Credit ($500 per dependent): $1000

Tax savings: $3,880*

Standard deduction: $13,000 x 15% = $1,950

Exemptions: ($4,150 x 4) x 15% = $2,490

Child Tax Credit: $0

Tax savings: $4,440*

Standard deduction: $12,700 x 15% = $1,905

Exemptions: ($4,050 x 4) x 15% = $2,430

Child Tax Credit: $0

Tax savings: $4,335*

*For illustration purposes only. Does not take into consideration any other deductions/credits, other tax situations, or state/local taxes.

†Self-employed (Schedule C) filers can still deduct these business-related expenses, as they have in the past. The repeal of unreimbursed work-related deductions only affects wage- and salary-earning employees who don’t own a business or work as a contractor.

The moving expense deduction (Form 3903) has been repealed for tax years 2018 – 2025, except for military members who were ordered to move as the result of a permanent change of station (PCS). These filers can still deduct their moving expenses.

The deduction for entertaining business associates and clients has been repealed for tax years 2018 – 2025. Prior to that, businesses could deduct 50% of the face value of entertainment (like sports events, theater, or golf) and 100% of the ticket cost to qualified charitable events, if the purpose was business-related.

Business meals are not considered entertainment and are still 50% deductible, provided certain conditions are met. More info

Meals provided for the benefit of employees will be 50% deductible in 2018 – 2025 and nondeductible after that. Formerly, these were 100% deductible.